Ethereum, the world’s second-largest cryptocurrency by market capitalization, has seen a significant 20% decline in its value, causing widespread turbulence across the decentralized finance (DeFi) sector. The dramatic drop comes after Ethereum reached a peak of over $4,000 in December 2024. The decline is attributed to a combination of fading post-election market enthusiasm, ongoing economic uncertainties, and diminishing user activity on its blockchain.
Data reveals a sharp reduction in daily active addresses and new wallet creations on the Ethereum network in 2025, signaling decreased on-chain activity. This trend has undermined Ethereum’s deflationary narrative as reduced transactions lead to fewer tokens being burned, putting inflationary pressures on its supply.
The impact of Ethereum’s price drop is being felt keenly in the DeFi space, with analysts warning of up to $336 million in liquidations on platforms that rely on Ethereum as collateral.
The incident has highlighted vulnerabilities within DeFi ecosystems and has renewed calls for collateral diversification to mitigate risk.
Ethereum’s struggles are part of a broader trend in the cryptocurrency market, which has seen growing competition from alternative blockchain networks such as Solana and Avalanche. These newer platforms offer faster transaction speeds and lower fees, challenging Ethereum’s dominance in the decentralized applications (dApps) and smart contracts space.
Economic and regulatory factors are further contributing to market volatility. Regulatory changes and major investments are shaping the crypto industry’s future, leaving market participants navigating an increasingly complex landscape.
Shogun Lin
